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A former small cap research analyst looks for value in the Canadian junior mining sector and shares his experiences, thoughts, and rants. The blog is free and for information purposes only, so should not be construed in any way as investment advice.

Let me add one more:6. Does your mining company plan on "diversifying" into the marijuana or cryptocurrency/blockchain space?
If the answer to this is "yes" or "maybe", then run the other way because that would signal to me that the mining projects probably are not viable and the company is jumping on a bubble bandwagon. Just because it is called cryptocurrency mining doesn't mean that it has anything to do with mining! But that is exactly what MX Gold (TSXV:MXL) is doing (link) and in a news release issued today the CEO stated that "I truly believe that the sector can provide our shareholders with a unique angle to differentiate ourselves from other mining companies." You can't make this stuff up!

MX Gold spent $471,506 on Professional, management and consulting fees, $179,836 on Salaries and benefits, and $250,516 on Investor relations and public company costs in the first half of 2017. Rather than looking for investments that have nothing to do with mining, perhaps management should have focused on its mining business and things like NI43-101 disclosure standards in order to avoid the BC Securities Commission having it retract a whack of bad disclosure relating to its mining projects (link).

In my opinion, wasteful spending and a lack of focus is far too rampant in the junior mining space. Capital is scarce and should be allocated to quality projects and teams. MX Gold recently raised $4 million (at $0.10 per unit with a full 5-year warrant at $0.20), very little of which is likely to be spent of real mining work since the company had a working capital deficiency of $1.6 million at June 30 and a burn rate of $2.3 million per year based on the most recent financials. My guess is that the $4 million is going to disappear very quickly, with very little going into the ground. More than likely, money will be spent on things like this pump piece by Future Money Trends (link), for which the company paid $85,000 last year. The only thing getting "mined" here seems to be investors' pockets.

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A former research analyst with over 10 years experience with a boutique brokerage firm and a large bank-owned proprietary trading desk on Bay Street. I now invest my own capital and provide consulting services to small cap companies and investment funds.
Contact me: rob@alphaadvisory.ca

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